Bay Area foreclosure sales at historic lows

Foreclosure sales in the East Bay and South Bay were at their lowest levels in six years in February, a foreclosure tracking company reported Tuesday.

The decline -- more than 60 percent from a year ago -- continues a downward trend that has accelerated in recent months, according to ForeclosureRadar, a Truckee-based foreclosure tracking company.

Fewer and fewer homes are being foreclosed because of a shift toward short sales and loan modifications spurred by two government actions, a $25 billion national mortgage settlement and the California's Homeowner Bill of Rights, said ForeclosureRadar chief economist Madeline Schnapp.

The flip side of that, she said, is a shortage of homes for sale, creating the lack of inventory that has resulted in multiple offers on homes. That's caused a run-up in prices that's helping to bring some homes back into positive territory. But many would-be sellers are still stuck with mortgages worth less than the value of their home, and are waiting until they are at least at a break-even point before putting their home on the market.

There was an uptick in the first two stages of foreclosure -- notices of default and notices that the bank intends to sell a home at auction -- but those filings are near historically low levels, ForeclosureRadar said.

"It's off a very depressed bottom," Schnapp said. "The longer term downward trend is intact."

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A total of 366 homes were sold at foreclosure or taken back by lenders in February in Alameda, Contra Costa, San Mateo and Santa Clara counties, down from 1,008 a year earlier, according to ForeclosureRadar.

Santa Clara County saw foreclosure sales drop 75 percent; Contra Costa County recorded a 50 percent drop; Alameda County was down by 65 percent; and San Mateo dropped 70 percent.

Phil McCarty of ZipRealty's Silicon Valley office said the valley has seen foreclosures "taking up a much smaller piece of the pie. In February, we only saw 5 percent of the existing single-family home sales that were bank-owned, and 6 percent of condos and townhomes."

Short sales -- where the home is sold for less than it's worth with an agreement with the lender -- commanded more than the asking price on many sales in Santa Clara County, according to ZipRealty.

Frank Bermudez, of Better Homes and Gardens Real Estate in Antioch, said underwater homes "are creeping up" to where the owner could sell without a short sale.

"We are seeing more equity sales. People that have equity are saying this might be the right time to sell," said Bermudez, who specializes in short sales

There's more bargaining with banks and prospective buyers by homeowners who are $10,000 to $40,000 short of breaking even on their mortgage, he said.

Borrowers who aren't very far underwater are asking lenders to lower their fees to help make theirs regular sales, and asking buyers to come up with a little more money to avoid the lengthy short sale process, Bermudez said.